Attorney Harvey Kesner sanctioned in Frivolous Lawsuit relating to MabVax: $MBVX

Penny stock lawyer Harvey Kesner has been sanctioned and fined after his lawyer, Steven S. Biss, disobeyed a New York federal judge’s order and tried to file a frivolous amended complaint accusing a big law lawyer of extortion and threats. The Judge lobed a one two punch and also granted the defendants, Baker Botts, motion to move the lawsuit filed in the Southern District of New York to Southern California where strong anti-slapp laws exist. Kesner is the long time lawyer for Barry C. Honig, who the SEC says mastermind a pump and dump stock fraud ring in over 40 stocks. Anti-Slapp laws will allow the defendants Kesner sued to ask the court to force him to pay their legal fees and impose penalties because the suit was allegedly filed as retaliation for Kesner being sued for fraud and malpractice.

Kesner’s main target of the litigation is Jonathan Shapiro, a lead litigation partner of Baker Botts. The lawsuit filed earlier this year for $35 million claims attorney Shapiro hatched a plan with a former client of Kesner’s, MabVax Therapeutics, to give evidence from an independent legal review of the investments made in the biotech company and subsequent disclosure in SEC corporate filings, to the Securities and Exchange Commission and the Dept of Justice that could lead to charges against attorney Kesner. The theme of Kesner’s lawsuit is that Kesner’s law firm was told they would have to pay Mabvax $9.6 million for Kesner’s alleged malpractice actions or the feds get the evidence. Evidence that includes Kesner allegedly advising Mabvax how to mislead a regulator in 2016 when they began questioning MabVax’s public filings and trading in the stock. Kesner was a named partner at New York based securities law firm Sichenzia Ross Ference. I was first to report Kesner was leaving the law firm, in the fall of 2018, on questionable grounds just weeks before his client, Barry Honig, was charged for securities fraud by the SEC.

A draft copy of the malpractice complaint, written by attorney Shapiro, obtained by this reporter, shows partners at SRF likely learned about Kesner’s alleged role in the Honig scheme just a month before the SEC filed their case against Honig. The suit was never filed in court. Instead a Boston-based law firm, Block & Leviton, filed a similar malpractice suit for MabVax a few weeks after Shapiro approached Kesner’s law firm for a settlement. And Baker Botts ended up suing all of Team Honig and others for their role in manipulating the stock price of MabVax and for trading as a group of undisclosed affiliates.

Baker Botts response to the complaint was swift, filing a motion to dismiss detailing how Kesner wasn’t telling the whole truth, after a trade publication for the legal profession, Law360, reported on the lawsuit glamorizing Kesner’s idea of being a victim of a RICO plot. Court filings show Kesner’s lawyer, Steven Biss, has a practice of saying outrageous things in lawsuit with the hope that the media will repeat them because his clients can’t be sued for libel or defamation for something their lawyers write in a lawsuit.

SDNY judge Hellerstein wrote in his decision to fine Kesner and move the case:

“After careful review of Defendants’ moving papers and Kesner’s Complaint, I hold that this case should be transferred to California. Without cataloguing what appear to be a number of glaring factual inaccuracies in the Complaint, or reviewing each and every one of
Defendants’ arguments for dismissal, I focus here solely on the need to transfer this case.”

Judge Hellerstein goes on to explain that Kesner repeatedly said in his complaint that Baker Botts sent a letter threatening to file a malpractice lawsuit without any intent of ever filing the suit but this just wasn’t true given a malpractice suit, that also accuses Kesner of fraud, was filed by another law firm a few weeks latter. As a result the judge order Kesner to pay at least a $1,000 fine for filing a frivolous motion and denied attorney Biss request to file an amended complaint.

A federal judge acknowledging that an untrue set of facts was written by attorney Steven Biss on behalf of his client, could be helpful for other defendants subject to attorney Biss’s pattern of vexatious litigation. Biss is currently suing multiple top media outlets like CNN, Washington Post, Hearst, McClatchy News for their coverage of U.S. Congressman Devin Nunes. Yesterday a federal judge ruled in Virginia that Nunes, through attorney Biss, can’t sue Twitter to reveal the identity of a parody account called Devin Nunes Cow that writes satire critical of the California congressman and others. Kate Irby was first to report on the outcome of the Twitter case. Additionally, other federal judges have warned attorney Biss that he could sanctioned. Sanctions for lawyers usually mean they will have to pay a fine but it can also mean suspension of a law license for not following their code of ethical practice.

Baker Botts wrote in their anti-slapp motion yesterday filed in Southern California that Kesner hasn’t even paid his court ordered fine yet.

Additionally, Biss is suing this reporter and Bill Alpert a senior reporter at Barron’s on behalf of Harvey Kesner. Alpert and I have never reported together. Like the Baker Botts case Kesner is trying to blame the journalist for ruining his career by reporting on litigation against him and his clients. The case was originally filed in South Florida where Kesner says he now lives. I have been representing myself Pro Se and worked with the Barron’s lawyer to get the case moved to SDNY. A judge ruled Florida was an improper venue for Kesner/Biss to file the case. Biss is joined in this litigation by a Florida lawyer Robert Buschel who says he is second chair. The duo are the same legal team that sued Baker Botts.

Attorney Buschel was also reprimanded by a the New York judge in my case when he tried to represent a wrong timeline for when Kesner left his law firm and how it related to the timing of the Barron’s article on his client.

Kesner’s goal in his litigation against me appears to try and use the courts to force me to reveal confidential government witnesses I interviewed in my reporting on his alleged role in the scheme tied to Barry Honig’s securities fraud. I stand by my reporting and have no intention of revealing sources even if it means I would be held in contempt. I am currently raising fund from readers to pay for my legal defense of this frivolous and harassing lawsuit. Remember Barry Honig also tried to sue me for reporting he was under SEC investigation in the fall of 2016 and then withdrew the lawsuit with prejudice in January 2018. That same year he was charged by the SEC for exactly what I reported he was doing. Evidence that has come out in the Honig ring investigation appears to show that while Honig was suing me he and Kesner knew Honig was under SEC investigation.

Additionally, the SEC has now come out and made public a transcript from one of their enforcement interviews in the investigation of the Honig securities fraud ring. As far back as 2014, the SEC was questioning another attorney Kesner worked with, Gregg Jaclin, about why Kesner was getting stock in a reverse merger deal involving PR Complete / YesDTC via an llc he owns called Paradox Capital. Jaclin was a partner in a securities law firm known for doing reverse merger deals called Anslow + Jaclin. Gregg Jaclin was sued for running a dirty shell company scheme by the SEC along with being charged with a felony in 2017 by the San Francisco DOJ for obstruction of justice in an SEC investigation. YesDTC and its CEO Joel Noel where charged criminally for running a pump and dump scheme. Jaclin has since made a plea deal in the criminal case and it’s unclear how much cooperation he is giving the DOJ in their case against Barry Honig and associates because his case is now sealed.

EDITOR’s NOTE: If you want to contribute to my defense fund in the frivolous lawsuit filed by Harvey Kesner please do so here.

The funds will go directly to the lo-bono attorney I will hire.

Aegis $5.1 million overnight raise for Digital Ally in Question: $DGLY

A small cap company that supplies bodycams to law enforcement, Digital Ally, saw its stock jump over 100% on Monday after protest riots in the U.S. extended over the weekend. The newly minted company gains got the attention of New York-based broker Aegis Capital Corp who convinced Digital Ally’s CEO, Stan Ross, to use its already filed shelf offering to sell an overnight discounted stock purchase agreement to retail investors. Aegis clients were rejoicing last night when their brokers, working under Anthony Lapadula, offered them the stock at only $1.65 after it had traded at a high of $2.53 on Monday. But people familiar with the transaction say there could be problems with an accurate account of the company’s stock float, which mean Aegis could have some problems with regulators in how the offering was sold.

Before the price hike the company had a float of around 13,000,000 shares and traded barely over a $1. But with Monday’s pop it caused institutional funds, with prior investments in the stock, to exercices their warrants, turn them into free trading stock, and cash out of their positions. This means there were more shares in the open market. Digital Ally had previously made SEC filings stating they were going to raise money with Roth Capital Partners and Lake Street. SEC rules say you can’t sell more than one third of the float off of a shelf offer in a 12 month period. And Digital Ally just sold an offering around $3 million a few months back.

Other broker dealers who had spoken with the company to raise money said they would need a ‘comfort letter’ from Digital Ally’s auditors or lawyers to confirm what the new share count is given so many warrants were exercised. That kind of proper due diligence check would take two to three days. But Stan Ross apparently found a firm, with a history of complaints against it’s broker dealer practices, to raise money off the hype. Additionally Aegis investment banking unit has made an exodus leaving it with only jr bankers. According to investors who bought the offering and insiders at Aegis, Anthony Lapadula was the lead I.B on last night’s deal. But Lapadula doesn’t have a series 79 license which is need to run an investment banking offer, according to Broker Check.

Last fall I was informed by company insiders that around half a dozen Aegis brokers had been called into their regulator, FINRA, for on the record interviews. Then in October I saw a SEC subpoena issued to a former Aegis broker who worked for Anthony Lapadula. It’s unclear which offering the SEC was focusing their questions on. A review in Broker Check shows Aegis has at least 34 regulator events. This includes complaints range from selling clients unsuitable offers to violating broker dealers rules regarding how and when they can sell an offering.

At press time Stan Ross and Anthony Lapadula did not return an email for comment. Aegis is run by Robert Eide, who goes by Bob, and founded the broker dealer in the mid-80s.

SEC gets Penny Stock bans for Florida men in Honig Pump & Dump scheme

The Securities and Exchange Commission has finalized the settlement deals for three members of Barry Honig’s pump and dump securities fraud scheme. John Stetson, Michael Brauser, and John O’Rourke III all agreed to penny stock bans at varying degrees and to not hold more than 4.99% in a penny stock. The SEC settlement is seen as forgiving because the monetary fines and disgorgement amount to just over one million dollars for each defendant. Their co-defendant, billionaire Philip Frost was ordered a $5 million fine and the SEC still has to finalize the amount the ring leader, Barry C. Honig, will pay. The settlements were presented to New York federal Judge Ramos on March 6, 2020 who approved them.

O’Rourke will pay a total of $1.153,326 of which $765,128 is for disgorgement of illegal profits from stock fraud. O’Rourke agreed to a lifetime penny stock ban

Brauser will pay a total of $1,175,768 of which $844,914.32 is for disgorgement. Brauser agreed to a lifetime ban but keeps to keep his position above 4.99% in Polarity TE ($PTE).

Stetson will pay a total of $1,154,149.28 of which $837,509.98 is for disgorgement. Stetson, who is believed to have began cooperating with the SEC last year, got only a ten year penny stock ban. Stetson’s agreement to settle with the regulator was signed October 29, 2019.

One of the funds that was run by Stetson but secretly held Barry Honig’s investment, HS Contrarian Investment, has agreed to pay injunctive relief but the dollar amount is not settled yet. As a result the SEC ask that the fund remain a defendant in the case.

The SEC settlement says the defendants have to sell positions in stocks they hold at least 5%. The penny stock ban means they can’t help raise money for stocks that trades below $5, market/promote the company, or serve on the board and consult for a penny stock. That means Michael Brauser’s monthly consulting gig at Red Violet ($RDVT) should end along with any stock position he has over 5%.

Only three stock were listed in the SEC case but the SEC said in their amended complaint some of the defendants, which included Brauser, executed the scheme in over 40 stocks. One of the stocks not named in the compliant was Riot Blockchain ($RIOT) who recently announced the SEC has told them the investigation into the company has been dropped.

I previously reported the SEC lost some of their claims against the remaining defendant, Rob Ladd, who is CEO of MGT Capital ($MGTI). His case is moving forward to trial.

There are no details disclosed about the status of the ongoing criminal case by the DOJ into Team Honig.

Final SEC Judgment as to Defendant Michael Brauser 3.6.20 by Teri Buhl on Scribd

Judge Dismisses Some SEC claims in Barry Honig Securities Fraud Case: $MGTI

A New York federal judge ruled this week that some of the charges against a defendant in the Barry Honig ring of pump and dump bad actors brought by the Securities and Exchange Commission will be dismissed. Judge Ramos ruled on February 25 that claims 3 and 4 of the SEC’s complaint relating to charging MGT Capital CEO, Robert Ladd, with fraud for failing to disclose he allegedly knew Barry Honig, Michael Brauser, John O’Rourke, John Stetson and friends were trading as an undisclosed affiliate group be dismissed. Ladd, the CEO of the publicly traded company, that once had cyber-security guru John McAfee as a partner, is the only remaining defendant that has not settled with the regulator.

A year and half after the SEC first brought the case, Ladd still claims this an overreach by the SEC and plans to fight the case to trial. The SEC is asking for Ladd to be banned as I public company CEO. I previously reported the SEC has said it plans to file another (it’s second) amended complaint involving Ladd and the judge has given them a deadline now of March 16th to have another go at it. The secondary liability claims involving Section 17(a) of the Exchange Act remain and so do the SEC’s fraud claim that Ladd allowed a misleading press release about John McAfee’s history with Intel to be published which encouraged main street investors to buy the stock because with McAfee involved the thought was MGT Capital could be one day be worth billions.

SEC claims for violations of the securities exchange act being thrown out at the motion to dismiss stage are rare. But Judge Ramos gave the SEC a back door by dismissing the 3rd and 4th claims without prejudiced. This means the SEC can try again with a new argument on why Ladd knew or should have know that team Honig was trading as a group and told his shareholders about it. But the SEC has only got two weeks to do it. And of course an amended complaint could mean the SEC adds new defendants.

Ironically, Judge Ramos also makes a point in his decision that an email Barry Honig wrote to Ladd back in 2015 saying he was investing as an individual in the private placement, after Ladd had made a vague comment asking how “your group” shares will be divided was something he didn’t believe Honig was telling the truth about. On a side note, that group of Honig’s also included Hudson Bay and Iroquois; who the SEC has not charged as defendants but keeps naming the individuals who run the funds in recent subpoenas.

The law firm that advised Honig and MGT Capital on team Honig’s investment (which got up to around owning 16% of MGT Capital) was led by none other than Sichenzia Ross Ference Kesner LLP. Honig was advised by Harvey Kesner and Ladd-MGT by another SRKF LLP lawyer. And they just happen to magically sign a waiver so that everyone would be on same team. This is the microcap law firm that I first reported removed Harvey Kesner as a named partner just weeks before the SEC brought their case and is the same firm fighting a malpractice suit because of attorney Harvey Kesner’s alleged bad actions relating to representation of MabVax. MabVax is another company in the SEC compliant that was pumped and then dumped by Team Honig.

It will be interesting to see what role the law firm (SRFK) played in advising MGT Capital that Team Honig wasn’t a group and shouldn’t be disclosed as such. And given all the discovery the SEC can get with recent subpoenas naming Kesner and a bunch of his former SRFK partners and associates there is good chance they will see other players role in this thing. What the SEC does with that information is another story.

Judge Ramos as also hinted in court filings that he is not going rule on the final amount Barry Honig will have to pay out in his securities fraud settlement with the SEC until all of the defendants cases have finished. So with Ladd’s case going toward trial that could mean Honig can hold on to his millions for a little while longer.

Additionally, we still haven’t seen the SF DOJ bring their parallel criminal case against the Honig defendants and it’s anyone guessing game at this point on who will be charged.

https://www.scribd.com/document/449211285/Judge-Ramos-Decision-MTD-SEC-v-Robert-Ladd-Barry-Honig-Case

Private Text shows Michael Serruya could be part of Misleading Aphria SEC Filing: $APHA $GGB

A private text exchange between an Aphria deal lawyer and a member of the board calls into question the accuracy of an regulatory filing with the Securities and Exchange Commission about a bid cannabis company Green Growth Brands made to takeover Aphria. The bid was deemed as ‘hostile’ by Aphria’s board early this year and drew press attention after Aphria’s stock had lost at least half its market share from a short seller report, published the first week of December 2018, questioning the value paid by Aphria for foreign cannabis assets that significantly benefited insiders, like Michael Serruya and Andy Defrancesco, without disclosing the true nature of the transaction. Aphria, who at the time was run by CEO Vic Neufeld, called Serruya an independent director and put him on a special committee to investigate the legitimacy of the Green Growth offer. New information shows Serruya could have used his position to cause the company to make a false and misleading SEC filing.

On February 7, 2019 Tim Kiladze reported for The Globe and Mail that based on a recent regulatory filing, then law firm partner Curtis Cusinato of Canadian-based Stikeman Elliott LLP, had been first to come up with the merger idea and brokered a meeting between the company CEOs and a board member in September 2018. Canadian multi-millionaire Michael Serruya swore in an SEC filing, on February 5 2019, that the timeline of how the Green Growth Brands bid to buy Aphria began was true. But the day The Globe and Mail story came out attorney Curtis Cusinato texted Michael Serruya from a burner phone he used saying the SEC filing didn’t tell the true story and as a result complained The Globe and Mail headline and story were “just plain wrong”.

The Globe and Mail headline read: Aphria’s former legal advisor brokered first meeting with hostile bidder

According to a text message reviewed by this reporter sent on February 7th at 9:45 am attorney Cusinato texted Serruya saying:

“You need to call me – article and your circular is just plain wrong and before that meeting I had never met CEO and CFO they didn’t even know who I was. SE did not broker meeting.”

The message was also reviewed by a person who worked with Serruya and Defrancesco to confirm their belief it was Cusinato sending the message from his burner phone. SE = Stikeman Elliott LLP. Cusinato wanted Serruya to change or clarify the filing because he felt Serruya had used his name and the name of his law firm inaccurately. This reporter confirmed with people that interacted with Cusinato that he was handing out his burner phone number to people on Bay St after the short seller report came out in December because he thought if the government or regulators were going to investigate they wouldn’t try to tap an attorney’s phone because of attorney client privilege.

“Cusinato was absolutely acting panicked at this time”, according to a Bay St source.

Assuming Cusinato is telling the truth, why would Serruya have Aphria lie about how the “hostile bid’ idea happen. Why say a big law firm and its partner lawyer came up with the bid idea? Maybe it was to hid the fact that this was really a backroom plan by insiders who didn’t have the best interest of shareholders in mind?

The Globe and Mail was first to report that Stikeman Elliott and Aphria were going to part ways after the short seller report came out because it found out that Cusinato was also the brother-in-law of Andy Defrancesco who benefited from Aphria over-paying for the foreign assets. Sources on Bay St confirmed Cusinato was actually asked to leave by the firm but allowed to resign publicly to save face. By the time Cusinato had sent the February 7th text he was no longer working for Stikeman. Then on March 6th a smaller Canadian law firm, Bennett Jones, announced they had hired Cusinato as a partner.

Aphria trades on the Canadian exchange TSX and U.S. exchange NYSE. As a result anyone who signs their SEC filings could be subject to SEC enforcement. The Securities and Exchange Act rules say you can not file misleading or untruthful public filings with the Commission especially if it is about a material event like a buy out offer. Serruya’s action could be a technical violation. Additionally it brings into question Serruya’s real independence. Regulators could examine if Serruya and Aphria made misleading statements about his independence that influenced investors decision to buy or sell the stock or vote for the Green Growth Brands bid.

I have previously reported that it was Serruya working with Aphria investor Andy Defrancesco in a backroom deal to engineer the Green Growth offer in a move to try and keep their secret control of the company, based on their own private text messages.

An additional private social media chat message, reviewed by this reporter, says that in early February Green Growth Brands director Adam Arviv was complaining to Andy Defrancesco about spending two hours on the phone with Serruya negotiating the Green Growth deal. It was odd that Arviv wasn’t complaining about negotiation with the Aphria CEO. The private messages are not totally clear what aspect of the deal Arviv was upset about but he did use threatening language when speaking with Defrancesco. The private chat is another example of how people involved in the Green Growth bid thought Serruya was in charge of the “not really hostile” bid. Arviv is the son of Harold Arviv who was accused blowing up his own disco club in the 80’s to get insurance money and also allegedly had ties to the mob. Harold Arviv went to jail in the late 80s.

Cusinato and his prior law firm Stikeman Elliott were contacted about the contents of the text message for comment and did not respond to emails. Michael Serruya has never responded to an email or phone call requesting comment or an interview.

Aphria Board Member Mike Serruya

Editor Note: Aphria’s descriptive timeline of the Green Growth Brands bid starts on page 22 of this SEC filing. Serruya’s signature swearing to the truth of the filing is on page 38. Aphria’s current CEO Irwin Simon also signed the statement.

Shady Colorado CBD company Folium Biosciences described in Lawsuit attempting reverse merger with Australis : $AUSA $AUSAF

A Colorado Springs wholesale CBD company, Folium Biosciences, announced it is going public via a reverse merger with Australis Capital ($AUSA) this week. Australis Capital is a spin-off of Aurora Cannabis ($ACB) a large Canadian cannabis company. I have reported extensively on some troubling behavior of Folium’s CEO Kashif Shan at Cannabis Law Report. This includes allegations of siphoning off company cash to his own family bank accounts, sidestepping regulations and risking employee safety in pursuit of profits, using hot hemp, faking COA reports and even attempting a murder for hire when a former executive left to start a competitive CBD company. Folium is currently battling at least three lawsuits from former executives who alleged Shan cheated them out of ownership in the company that they have contractual rights to. Shan was former mortgage broker who filed bankruptcy during the financial crisis and was sued by the trustee of the bankruptcy for fraudulent conveyance. He started Folium in 2015 under the llc Whole Hemp Company, which is structured as partnership of membership units (not equity).

Folium’s relationship with Scott Dowty of Australis started earlier in the year when Dowty’s company made a $3 million investment into Folium. I have previously reported that Dowty was part of a false and misleading press release that alleged cause the stock price to jump. Dowty is a native of Las Vegas with no previous experience in the cannabis business. Australis is listed on the Canadian Stock Exchange which has weak reporting requirements and trades in the U.S. as a foreign issuer on the OTC Markets ($AUSAF). The stock hasn’t done well since Dowty spun out the company trading under $1. This merger appears to be a last ditch effort for both men to exit their investment.

Folium announced a new llc they set up this year called Folium Equity Holding will merge with a new llc Australis set up called Folium Merger Sub. The agreement was signed on Tuesday December 10. Here is the thing tough, according to people who hold Folium membership units the company didn’t send out a notice for a vote of membership unit holders. To approve a reverse merger with an llc all unit holders have to approve the merger with an unanimous vote and that appears to not have happened.

Additionally, Folium is currently battling a lawsuit that is trying to remove Shan and appoint a receivership to run the company because a membership unit holder is worried he is moving assets out of the company. Any of the three former Folium employee suing could also make a move to file an emergency injunction motion to stop the merger or file a FINCIN complaint with the Securities and Exchange Commission if they think Shan didn’t follow the bylaws of the company in signing the merger deal.

When Kashif Shan first learned that he was going to be personally named in a lawsuit accusing him of taking money out of Folium for personal gain he moved his 5 bedroom, 6 bath, 11,000 square foot home into an llc called Motu llc on August 12th 2019, according to Colorado Springs public records. During the first year of starting Folium, Shan paid $1.4 million for the mansion in 2016. The name of the person running the llc that owns the mansion now is a Denver lawyer from Holland & Hart, David E Crandall who is know for helping individuals manage their wealth and reduce their tax liabilities.

Folium’s Kashif Shan has refused to respond to emails and phone calls requesting comment and the company’s former general counsel Craig Brand appears to be missing from the company and refuses to comment.

Update: I have reported the third part of my investigation into Folium Biosciences at Cannabis Law Report. If you are a former or current Folium employee or investor in the company who wants to speak out about wrong doing you have seen at the company you can contact me anonymously at teribuhl@gmail.com

UPDATE 2.19.20: Scott Dowty, the CEO of Australis, announced his company has called off the merger with Folium Biosciences. Dowty said new information came to light that influenced his decision but did not list the reason in the company press release. Folium recently went through massive layoffs according to staff who said Folium founders/executives said the company is having financial problems.

Folium CEO office poster

This is a poster Kashif Shan had made which use to hang in his office at Folium Biosciences. The caption says “Around this camp their is only one Chief. The rest are Indians.” Shan’s family is from Pakistan and is not Native American.

Did Aphria’s Irwin Simon give Selective Disclosure to investor Michael Serruya? $APHA $LHS

Aphria interim CEO Irwin Simon worked a backroom deal to off load the company’s stake in U.S. cannabis investments with Canadian mega million Michael Serruya before he took over the CEO job at the Canadian marijuana company. According to text messages obtained by this reporter between Serruya and Irwin sent on the morning of Feb 6, 2019, Michael Serruya took the lead in speaking for his family and Andy Defrancesco to negotiate the price and timing of when Aphria ($APHA) would exit its stake in Liberty Health Science ($LHS). In December 2018 the Toronto Stock Exchange, where Aphria was listed, forced the company to divest any stake in U.S. cannabis companies because they sold products that were illegal by federal law. Irwin was Chairman of the board at the time but Aphria was run by Vic Neufeld who had made an investment in a special-purpose private company called DFMMJ Investment Ltd for Aphria. DFMMJ managed cannabis farm Chestnut Hill Tree Farm, which was one of only seven licensed dispensaries of medical cannabis in the state of Florida at the time. Chestnut Hill Tree Farm was bought by Liberty Healthy Science.

DFMMJ Investment was first exposed as being secretly set up as an LLC by Andy Defrancesco when two short sellers published a series of reports about self-dealing and a lack of disclosures at Apheria and Liberty Health Science in December 2018. The reports tanked Aphria’s stock. Serruya is a board member of Aphria. I have previously reported, based on text and emails from Serruya, he was also controlling Liberty Health Science and DFMMJ investments from behind the scenes by placing puppet executives in charge.

Instead of selling Aphria’s stake in $LHS on the open market through a broker dealer, where buyers don’t know who is selling, the text messages show a transaction was being set up to benefit the Serruya family fund and Andy Defrancesco.

At 8:14 am Simon Irwin sent a text inviting Serruya to a hockey game. Irwin’s follow-on text said ” wrong person” but “welcome to come”. 50 minutes latter Michael Serruya responded:

Spoke to family member and Andy.
-They are prepared to leave in place what we agreed to, in the event that the shares are sold within the first 6 months.
-if the shares are sold from 6-12 they would pay aphria 3% of the net gain. ie. if during month 6-12 the shares are sold for $1.72 per share, (profit of $64 million), they would pay aphria $1.92 million)
-Alternatively they would be prepared to pay an additional $.02 per share ($0.74 p/s), and make the entire 6-12 month section go away.

An hour latter Irwin texted Serruya “call me”

Later in the day Michael Serruya texted he tried to call. Then at 7:48 pm Irwin texted Serruya “Hey working on getting done”.

The exchange leaves a lot of open questions. First why wasn’t the CEO of the company, Vic Neufeld, speaking to Serruya. Why was Serruya speaking for Andy Defrancesco who was not an officer/board member of Aphria or considered an insider? Did this arrangement constitute Serruya or Defrancesco getting inside information and did they trade off that? Why wasn’t the people involved in this arrangement disclosed in Aphria’s public filings?

On the face of things this read like Aphria is giving selective disclosure, which is against securities law in Canada and the U.S.

On February 19th Aphria made this announcement about offloading $LHS. The public announcement only mentions “a group of buyers” but doesn’t name Serruya or Defrancesco. In February, the company was on a PR campaign to repair its image of buying inflated cannabis assets in LatAm and Jamaica from companies that benefited Andy Defrancesco, Serruya and their buddies. Irwin Simon officially took over the CEO job after Vic Neufeld was kicked out on February 15, 2019.

This week Aphria announced earnings which showed the company is not turning a profit yet from marijuana operations. They also disclosed Michael Serruya will no longer be on the board. According to people I spoke with who work on Bay Street, Serruya is telling people he resigned from the board. I call B.S. on that and think it’s more likely Irwin finally asked him to leave given my story last month that showed how Serruya worked with the head of Canadian broker dealer Clarus to allegedly get inside info and conduct match trades.

Last month I verifed the text messages were written by Irwin when I called the cell phone and he answered. I told him I had copies of his text with Serruya and began to read them to him so he could comment on their intent. He then hung up on me and didn’t let me finish. I texted him saying we need to finish our conversation as the messages could imply insider trading and other things and he immediately answered “I am not worried as there is no truth to this, this never would happen.” Except he didn’t know which text I had.

Michael Serruya didn’t return an email for comment asking about him leaving the board. In fact, Serruya has never responded to any of my requests for comment. He has aggressively been grilling people on Bay street (or anyone he has worked with) trying to find the source of the people who leaked the texts.

The Globe and Mail this week reported Irwin would be getting a $10 million pay package in stock and cash. “Mr. Simon’s arrangement treats him as an independent contractor, paying him $500,000 annually for the CEO job and $600,000 annually to be chairman”, according to the Globe and Mail.

Aphria is still battling a shareholder securities fraud class action lawsuit that names Andy Defrancesco personally as a defendant along with the former Aphria CEO Vic Neufeld.

Text messages show Cannabis investors Defrancesco & Serruya allegedly Colluded with Clarus Securities’ Christodoulis in Multiple Stocks

A foreign investor in the cannabis sector published a report this week detailing how Andy Defrancesco and a gang of high net worth investors set up complicated private transactions securing dirt cheap stock in the company Sol Global Investments would reverse merge with to become publicly traded. The report only uses research from the cannabis company’s obscure and often confusing financial statements to show Team Defrancesco getting millions of shares of stock at a discount 25 times less than what it was sold to unsuspecting retail investors. To execute the scheme they had to have had help from gatekeepers. New emails and text message obtained by this publication now show enablers such as lawyers, friendly CEO’s, the head of a broker dealer, and a mega millionaire investor collude together to allegedly manipulate multiple stocks, like Sol Global, over the last decade, rape retail investors through self dealing transactions, and possibly trade on inside information.

The investor report goes back to September 2016 when a highly diluted private placement took place with an investment into a cash poor company called Kitrinor Metals led by a “finder” who happen to get 8 percent of the gross proceeds of the offering and discounted warrants. The report says:

While past shareholders paid over $1.2/share, participants of the private placement got them for $0.05 (Common Shares) and $0.10(Warrants) respectively-That’s25x higher.

The author of the report reached out to Sol Global’s current CEO Brady Cobb and ask him to identify the unnamed players in the public filings. Cobb said he answered some of the author’s questions on twitter but Cobb wouldn’t say who the finder was when I wrote him for comment.

According to a person who worked with Defrancesco along with a review of deal documents and press releases that finder is none other than Andy Defrancesco. This means before he became chairman and CIO of Sol Global he was already racking in thousands of dollars to set up a Multi State Operator cannabis company that he knew he was going to control as a public company down the road. Defrancesco became CIO in the fall of 2018 and as I reported early this month was forced out as an officer of the company from negative press. It’s unclear how much of the millions in cheap warrants and stock Defrancesco has retained through multiple llc’s and family members names.

Defrancesco uses some of the discounted warrants and stock by giving them to a trader named Andrew Rudensky. I reported this month Rudensky was named in an OSC investigation and was banned as a broker for two years by Canadian regulator IIROC. Rudensky effectually now works for Defrancesco. On Monday there was an opening run on Sol Global stock ahead of the investors report. The company knew the report was coming out. The stock, which trades on the Canadian Stock Exchange and the OTC Markets, flew up by ten cents without a lot of volume of trading. $Sol.cn $Solcf are the tickers for the stock which has been trading under one dollar. According to a person who worked with Defrancesco, he uses Rudensky to effect trading orders to get the stock up to counter negative press or so Defrancesco and friends can dump their shares.

The investor report goes on to detail other private placements that benefited team Defrancesco at the expense of retail holders. We also see another one of Defrancesco’s enablers helping raise money for the creation of Sol Global (formerly named Scythian Biosciences) which is Clarus Securities run by Jimmy Christodoulis.

Christodoulis, another Canadian, is often rumored to be very close friends with Andy Defrancesco. The broker dealer he runs is a sponsor of Andy’s son’s professional race car team. And now based on a series of text messages I received between Christodoulis, Andy Defrancesco, and mega millionaire investor Michael Serruya we know they are more than just drinking buddies.

Michael Serruya was a major investor in an LLC that Sol Global bought with cash and stock called CannCure, according to a copy of Serruya’s internal documents at his private equity firm, obtained by this reporter, the initial investment was for $22 million. When Defrancesco and Serruya make private investments in the form of debt that turns into common stock there are usually some restrictions to when the stock can be traded. It’s called restricted stock. If they want to get out of the stock earlier than the deal documents or the law requires they would need a lawyer to write a false opinion letter or a broker dealer willing to trade their restricted stock for free trading stock. Both moves are illegal.

According to a group text message from April 26 2018 at 9:37pm, obtained by this reporter, Jimmy Christodoulis, allegedly does this for Defrancesco and Serruya.

Andy Defrancesco texted to Michael Serruya and Jim Christodoulis:

Mike-Jimmy here also
Announce increase from $10 to $20m raise
Clarus 100% manager
They swap FT for restricted for us

Jim Christodoulis texted back:

Understood

FT stands for free trading shares.

Christodoulis and Serruya were made aware of the content of the text messages I obtained yesterday and would not comment on if they colluded to work with Clarus as a broker dealer to raise money in return for swapping out stock. A move that would be viewed as a securities violation by regulators if they can prove the swap stock was made. The text chain doesn’t say which stock they planed to do this with.

I have obtained over a dozen text messages with conversations on separate dates between Michael Serruya and the men he alleged colludes with. A lot of the messages are Serruya complaining to Jimmy and Andy about the price of Aphria and Liberty Health Sciences. Serruya is on the board of Aphria ($APHA) and was an initial investor in Liberty Health Sciences ($LHS). The phone numbers are confirmed as belonging to each man.

On November 8th at 9:48am Serruya text Christodoulis:

If I could convince the aph Board to fire Vic, and get real bankers, the stock will hit $10 today

Christodoulis responds:

Why the fuck are you offering 110k of LHS put loud on the board well below where I’ve already traded 500k shares today
Moron

Defrancesco chimes in

Fucking retards

Serruya responds to Christodoulis and Defrancesco with more F-bombs and then writes:

Weeds up $1.10 and aph is up all of 21 pennies.
I hope the 2 of you, and Vic, get struck by Lightening

The foul mouth locker room talks is central in most of the text messages with the men calling each other faggots, pathetic and morons and then pat each other on the back when one of the stocks they invest does well. The Vic Serruya is referring to is Vic Neufeld, the former CEO of Aphria that was forced to step down this year. Serruya’s nickname for Defrancesco is “self absorbed 3 foot man” and for Christodoulis it’s “Greek angry bastard”. Defrancesco responded in an email to this reporter that he is also called “little man or five foot nothing” by Serruya. Defrancesco says he is 5 foot 4 1/2 inches tall (But apparently he has lied on his drivers licenses because a public records search for over a dozen Broward County, Fla. traffic infractions says he is 5 feet 6 inches).

On October 17 Serruya texted Christodoulis and Defrancesco:

I’m nominating you two faggots for bankers of the year award.
Aphria,
Kalytera,
bkd,
sythian,
Delavaco,
you guys are fucken legends.

The text message exchanges also show Christodoulis talking about a private raise for MedMen and estimating how well it will sell. Serruya also ask Christodoulis for information about a stock called MedReLeaf and Defrancesco chimes in that Serruya needs the info so he can short the stock. MedReLeaf was acquired by Aurora in May 2018.

On October 3rd Christodoulis writes Serruya with Defrancesco included in the text message chain:

Good Morning Michael,
I see you out there on the LHS this am. If it helps I can buy 1mm @ 85c.
Let me know. Thx

Serruya writes back that he is wrong it’s not him in the trade

Christodoulis responds:

I didn’t think it was you but wanted to make sure I let you know just in case
Hope you’re well

The language in this text could be construed as Christodoulis, the head of a large Canadian broker dealer, willing to effect a wash trade for Serruya to help create liquidity in the stock. Wash trades are a securities violation.

Jimmy Christodoulis and Michael Serruya did not respond to my emails for a request for comment on the content of the text message. Defrancesco would not answer questions sent in email except to respond with another disparaging personal message about this reporter and then sent a second email saying No Comment. According to more than one person who has worked with them on Bay St, the men have been calling in people who work with or have worked with them to have their communication equipment checked to see if they are communicating with this reporter.

Update 9.21.19: Andy Defrancesco says he is 5.4 1/2 inches I previously reported he is 4 foot 8 inches.

Editors Note: Given the understanding and past experience that Serruya or Defrancesco threatens people who speak with journalist I am not publishing the actual text messages I have obtained or disclosing sources that sent them. They have been verified with a third party consultant to confirm that are authentic communications. The investor who wrote the analysis quoted in this story has said publicly he did not end up buying Sol Global stock and was not paid to write the analysis. This is the second story in a series of reporting on the internal documents and communications I received. Teribuhl.com is funded by reader donations please consider supporting independent journalism with a donation today.